Expanding productive employment

The ILO's concept of "decent work", has four main pillars: the centrality of employment in national policy, the guarantee of workers' basic rights, a floor for social protection, and the promotion of social dialogue.

Industrial employment is a key element in creating jobs, reducing poverty and raising standards of living. Industry's demand for labour depends partly on the country's strategy for trade and development. An overvalued exchange rate, when combined with industrial protection and tariff exemptions on imported capital goods, tends to encourage a pattern of industrial development that limits employment growth. In addition, protecting industry discourages the farm sector, a sector that tends to be significantly more labour intensive than manufacturing. Outward-oriented strategies that provide equal incentives to the agricultural and manufacturing sectors are better able to combine the objectives of employment growth and efficiency in the allocation of resources.

Employment is the central element of development. It is the source of production and income. In most parts of the world, unemployment is worse today than at any time since the end of the Second World War. Societies have the knowledge and the means to overcome this problem. This, however, requires a degree of imaginative cooperation, which has been rare in recent history. In neither the industrialized nor the developing countries should current levels of unemployment and underemployment be accepted as an unavoidable component of modern society. It requires the elaboration and implementation of employment-oriented strategies and policies at the national and international levels.

Of a world labour force of 2,800 million people, an estimated 30 per cent are not productively employed. More than 120 million people are registered as unemployed in the world. They are people who seek and are available for work, but cannot find it, not even for one hour a week. Many more - estimated at around 700 million people - are underemployed. They are the working poor. Many of them work for long hours, but since the productivity of their work is low, many do not earn enough to lift themselves out of poverty. They form the bulk of the estimated 1,100 million absolute poor in the world. Given the increasing influx of new entrants into the labour market, the employment challenge will rise further in the years to come.

In economic terms, employment is productive when it adds at least as much to social product as the income for which the worker is willing to work and when that income exceeds the level of absolute poverty. Possessing neither capital nor land, many of the more than 1,000 million poor people in the world can rely only on their labour to earn a living. So full and productive employment is the most effective method of combatting poverty.

In most regions of the world unemployment and underemployment are rising rapidly. In the industrialized countries unemployment is forecast to reach 8.6 per cent in 1994, or 35 million people. The rate of unemployment will then be almost 12 per cent in Western Europe. This overall picture conceals considerable national variation. Particularly worrying is the rapid increase in long-term unemployment, the rise in unemployment in countries which have traditionally had low levels, and the fact that since the beginning of the 1970s the average rate of unemployment in Western Europe has risen from the trough of one business cycle to another.

Unemployment rates of over 15 per cent are now common in eastern Europe, while in a few years such rates or higher are expected in the countries of the former Soviet Union. Poverty has also sharply increased, particularly in countries with high rates of inflation. Employment in the private sector is rising rapidly all over the region, but the process of mass lay-offs in the public enterprises has been very rapid and unemployment has increased dramatically in the economies in transition.

Most of the countries of sub-Saharan Africa have faced serious economic crises during the past two decades, which have exacerbated the unemployment problem. Urban unemployment is now reported to be about 20 per cent and is expected to rise further. More than 60 per cent of the urban labour force is in the informal sector, mainly involved in "survival" activities. In the rural areas underemployment affects well over 50 per cent of the labour force.

The countries of Latin America have gone through more than 10 years of adjustment policy and are now faced with high and increased levels of poverty and underemployment, principally in the urban informal sector. But urban open unemployment is now back at about 7 per cent - the same as levels reached in 1980. Recently, economic growth has increased in most countries of the region and inflation has been brought back to manageable levels.

In North Africa and the Middle East rates of unemployment range between 10 and 20 per cent. It is mainly the young people who have suffered unemployment, resulting in serious social and political unrest in some countries of the region. Financed - directly or indirectly - by booming oil revenues in the 1970s and 1980s, the public sector - including public enterprises - is comparatively well developed. As countries have only recently started the process of adjustment, it is expected that unemployment will continue to rise over the next few years.

The employment situation is different in East and Southeast Asia. These economies also had to adjust to the hostile economic climate of the 1980s, but they did so more successfully than most - creating jobs and improving real incomes. The South Asian economies, mainly India and Pakistan, saw a distinct improvement in growth, leading to reduced - but still high - levels of poverty and underemployment. About one half of the estimated 1,100 million of the world's poor people live in South Asia and 15 per cent in East Asia. Following aggressive export strategies, the developing countries of East and Southeast Asia have achieved high rates of economic growth and sharp reductions in poverty, and many of these economies are now beginning to experience labour shortages. China has also experienced rapid growth in productive employment and a reduction in poverty.

Policies for the expansion of productive employment will have to be designed in the new context of globalization. The spread of marketization and liberalization throughout the world has resulted in the rapid development of a series of global markets. Financial and commodity markets have become international, as have the flows of technology and management information within transnational corporations.

There clearly is no single prescription for achieving higher rates of productive employment. Experience indicates that there are few easy methods of expanding employment and alleviating poverty, and that piecemeal efforts are generally insufficient. It is critically important, therefore, to pursue mutually reinforcing policies in several areas simultaneously.

A number of policies may be regarded as crucial: (a) promotion of sustainable high growth of effective demand; (b) achievement of macroeconomic stability with high levels of employment and distributive justice; (c) development of policies and institutions that encourage efficient functioning of the labour market; and (d) establishment of an overall system of incentives free of allocative distortions, thereby leading to higher productivity of resources. In addition, countries which have linked economic policies with human resource development and employment policies have had greater success in promoting employment. Policies in these areas will be facilitated and enhanced if the key national actors are enabled to participate in clearly understood and self-defined ways and if a sense of solidarity prevails. These issues will be further developed below.

Most jobs in the future are likely to be created outside the state sector in individual private and cooperative enterprises. These enterprises are fundamental to economic life; they express the initiative, creativity and freedom of individuals who, by organizing human and material resources, produce goods and provide services that contribute to the satisfaction of individual and societal needs. We take the view that the state should make enough room for individual private and cooperative enterprises to grow freely in a competitive market. In the developed countries, it is unlikely that existing large enterprises will be a source of employment growth in the future. In this context, small- and medium-sized enterprises are vital.

Although the state is not likely to be a primary source of job creation in the future, it will retain important economic and labour market functions. The role of the state is undergoing change which, in fact, may add to a government's responsibilities. The issue is to restructure or adapt governmental machinery to perform the tasks it has the potential to do best.

To begin, the state must create the enabling environment or the conditions for the private sector to function more efficiently. This includes the following measures: ensuring a proper legal framework (including the definition of property rights); establishing a comprehensive and readily understandable investment code and a stable investment environment; creating labour legislation which conforms with basic, non-discriminatory and realistic standards, carrying out sound fiscal policy; and constructing and maintaining the necessary infrastructure. It also means treating small and micro-enterprises in a non-discriminatory manner and ensuring that they have access to reasonably priced credit, training and technical support services. This latter condition can assume particular importance in developing countries. Overall then, each government should establish the framework for pursuing high levels of productive and freely chosen employment as major goals of policy (in accordance with the objectives set out in the Employment Policy Convention, 1964 (No. 122) of ILO).

Where they exist, the representative organizations of workers and employers - the social partners - must also be closely involved in job creation. As key actors determining the nature of employment, they must consult and work together to arrive at decisions which achieve balance between flexibility of labour markets and security of employment, and between the private and the social good. In the process, freedom of association must be a fundamental right.

In most developing countries the vast majority of workers are not employed in the modern, organized sector. Many people work in precarious, marginally productive jobs. All workers should have the right to organize, and governments should create the conditions within which the marginalized workers can form their own associations and express their interests. The established social partners should ensure that their actions are compatible with the economic interests of the many workers who currently are unorganized.

In addition, the move towards greater globalization of the world economy has far-reaching implications not only for the quantity, quality and distribution of jobs but also for social partnership itself. With increasing decentralization of operations and subcontracting across national boundaries, there is dispersion of production of the components which eventually constitute end products. This raises a new and complex set of issues regarding industrial relations.

ILO provides assistance in the design of macro-economic and development strategies consistent with sustainable social employment goals. Employment generation is a central objective of development strategy in the 1990s.

Promoting employment is one of the objectives of the European Union and has become a "matter of common concern" for the Member States (Article 2 of the EC Treaty). The objective is to achieve "a high level of employment" without weakening the competitiveness of the European Union (Article 2 of the EU Treaty). To achieve this objective a new power has been vested in the Union, supplementary to that of the Member States, concerning the preparation of a "coordinated strategy" for employment. The core of this strategy consists of common guidelines similar to those adopted at the Essen European Council. The new Title VIII (Articles 125 to 130) of the EC Treaty spells out these objectives and how to achieve them. It also provides for the creation of an Employment Committee.